The market has fallen over 30% from the highs. Maybe you've already called your fund or 401(k) manager and asked to liquidate your losers or the entire account. Here is what you probably heard.
"I don't recommend it."
That is typically followed by, "If you do pull out now, you will miss the opportunity when the market turns."
I say to that GREAT, you did such a fine job doing nothing for the last 30% downturn, I will see you in the next 20% downturn.
These managers are only paid to buy. They have very little idea about bear markets. And they lose their jobs anyway when clients lose too much money or pull out en masse. Then, like in 2008, they suffer post-traumatic stress and do not buy when the market finally bottoms.
Of course, the public sells the lows and buys the highs. But this is not the low.
On another note, rumors are circulating that there is a potential for an Iran-backed attack against the U.S. in Iraq. One way to get oil prices up quickly is to start a war or blow up a few oil fields, like what happened in 1990. Ask your fund manager what they would do in that case.
One thing I can tell you is, if you mention the term stagflation, they will have to look that up.
Here, I have warned you over and over that, once the FED's offering U.S. dollars in exchange for treasury debt cools down, the Pandora's Box for stagflation is huge. And so it goes.
Your fund manager is not your friend. Heck, you are probably smarter than they are. (Especially if you read my daily!)
Finally, regardless whether those rumors turn out to become facts, you'll still be so glad you took control over your money! Here again are the signs to watch-
- A debasing dollar and more of a sell-off in high yield bonds.
- Gold futures holding around 1580 and clearing 1620, 1680 and then 1700.
- Food commodities starting to rise.
- And now, oil futures returning to over $24 a barrel.
- S&P 500 (SPY): 228 support and 253 resistance
- Russell 2000 (IWM): Inside week so far. 101.60 support and 112.56 resistance
- Dow (DIA): Inside week. Support 190 resistance 216.35
- Nasdaq (QQQ): 175 support, 192.35 resistance
- KRE (Regional Banks): Inside week. 31.65 resistance, 30.00 support
- SMH (Semiconductors): Inside week. 105 support, 115 resistance
- IYT (Transportation): Inside week. 123 support, 137.70 resistance
- IBB (Biotechnology): 1-5.22 pivotal
- XRT (Retail): Inside week. 27.70 support, 30.00 resistance
- Volatility Index (VXX): Inside week - 50.00 pivotal
- Junk Bonds (JNK) Inside week: 94 resistance, 87 support
- LQD (iShs iBoxx High yield Bonds): 120 pivotal support
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Photo credit: Will Dubby - friend and artist
